Tax reform necessary, but taxpayers' interests should be foremost

Louisiana residents pay some of the lowest taxes in the nation, but the tax code is complicated and sometimes, it's hard for individuals and businesses to navigate its complexities.

There are 468 tax exemptions, most of which the average taxpayer doesn't know about, said Tim Barfield, secretary of the Louisiana Department of Revenue and Taxation, during a meeting with The Daily Advertiser's editorial board earlier this month. And it's time to reform the state's unwieldy tax code, he said. Tax reform will be Gov. Bobby Jindal's top priority in the next legislative session, which begins April 8.

The goal is to make the tax code simpler and "flatter," Barfield said, while keeping it "revenue neutral" - that is, neither raising nor lowering taxes.

We agree with Barfield that a simpler tax code would encourage economic development, as well as benefitting individual taxpayers.

This is an ambitious and worthwhile project, but legislators should take care to make sure the taxpayers of the state are the main beneficiaries of the changes.

State Rep. Stephen Ortego, D-Carencro, said he agrees that the state need tax reform, but has some reservations.

"There are no details yet" from the Jindal administration, he said Thursday. "It's awfully familiar. The last time we were told it was going to be so great and we didn't see the details, it was the voucher program, and now it's being called unconstitutional."

Ortego is right to be cautious. The Jindal adminstration's leap-before-you-look attitude has also been responsible for the loss of the health care safety net for the poor before alternatives were worked out.

And yet there is no doubt the tax code needs fixing. The Institute on Taxation and Economic Policy, a nonpartisan tax watchdog group, has listed Louisiana among the top 15 states with potential for major tax reform.

At the same time, Louisiana is rated 47th in the nation in terms of its tax burden to citizens and businesses. And this is an instance in which being at the bottom is a good thing, Barfield said.

The problem is that the perception to outsiders - especially businesses that might relocate to this state - is that Louisiana has high taxes, because low tax payments are achieved through a web of deductions and credits.

The inventory tax, which many businesses may find unattractive, is an example of something that needs reworking. While businesses pay an inventory tax, they get a full inventory tax credit on state taxes, with a net payment of zero. But it takes some digging to find this out.

The solution would be to eliminate both the inventory tax and the inventory tax credit, for a revenue neutral solution.

But it's not that simple. The inventory tax is collected at the municipal and parish level and forgiven at the state level. That means that if the tax is eliminated, parishes, cities and towns - not the state - would lose that source of income.

One of the challenges will be to figure out how to compensate local governments for the loss, Barfield said.

Simplifying the tax code will not be easy on more than one level.

"For most exemptions, we have a passionate set of constituents who show up and say how important it is," Barfield said.

Still, with input from a variety of groups, including taxpayer groups, CPAs and members of the legislature, Barfield said he hopes to come out with the major policy points by February.

While a more understandable tax code would certainly benefit ordinary citizens, the conversation about tax reform seems to emphasize making the Louisiana tax climate more attractive to businesses that are looking for a new home.

Economic development and job creation are both vitally important to the state. We urge the administration and lawmakers to make these changes while always keeping the best interests of the individual taxpayers in mind.

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Tax reform necessary, but taxpayers' interests should be foremost

Louisiana residents pay some of the lowest taxes in the nation, but the tax code is complicated and sometimes, it's hard for individuals and businesses to navigate its complexities.There are 468 tax

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